Six reasons your business loan application was rejected

Find out what you may have missed and what you'll need to do to get approved.

Updated

Whether you need finance for investment, equipment or to manage cash flow, there are a number of requirements you will need to meet to be approved for a business loan. If your application has been rejected, it's important to understand the reason why in order to give yourself the best chance of being approved in future.

Learn about the common reasons business loan applications are rejected, how you can fix your application and compare business loans below.

Ready to apply again? Compare business loans now

Data indicated here is updated regularly
Name Product Min. Loan Amount Max. Loan Amount Loan Term Upfront Fee Filter Values
Valiant Finance Business Loan Broker
$5,000
$1,000,000
3 months to 5 years
$0 application fee
A Business Lending Specialist from Valiant Finance can give you access to competitive business loans from over 70 lenders. Loans between $5,000 and $1 million are available. Request a call – your loan can be funded in 1 business day.
Max Funding Unsecured Business Loan
$2,000
$300,000
1 month to 1 year
$0 application fee
An unsecured business loan from $2,000 that offers convenient pre-approval and no early repayment fees.
OnDeck Business Loans
$10,000
$250,000
6 months to 2 years
3% of loan amount
Apply for up to $250,000 and receive your approved funds in one business day. Minimum annual turnover of $100,000 and 1 year of trading history required.
Westpac Business Loan
$5,000
$1,000,000
1 to 30 years
$0 application fee
Purchase a new vehicle, equipment or support your cash flow with a business finance solution from Westpac.
ANZ Secured Business Loan
$10,000
$10,000,000
Up to 15 years
$600
Benefit from a low rate when you secure this loan with property and/or business assets. Loans from $10,000 available.
ANZ Unsecured Business Loan
$10,000
$1,000,000
Up to 15 years
$600
You can choose a fixed or variable interest rate
Apply for a loan from $10,000 with no security required and benefit from flexible repayment terms.
loading

Compare up to 4 providers

Why was my business loan application rejected?

If you've been rejected for a business loan, the lender is likely to explain the reason your application was turned down, but this is not always the case.

Here are some common reasons your loan application may have been turned down and what you need to do before you reapply:

Having bad credit

While there are bad credit business loans available, negative marks on your credit file can usually cause you to be rejected from receiving a traditional business loan. If you’re unable to honour the financial commitments you already have, lenders are unlikely to approve your application for an additional loan. Make sure you check the eligibility criteria set out by the business lender or check with the lender directly to see if your credit history will be a problem.

Lenders usually check the credit file of the company director when approving a business for a loan, but they can also check the business's credit file for bankruptcy information and other financial details.

  • What should I do before reapplying?

You can order a free copy of your personal credit report once every 12 months within 90 days of being rejected for credit. This way you're able to check for possible errors or see where you can reorganise your finances to improve your credit rating. Before you apply again, make sure you have taken steps to improve your credit rating, or look into lenders that offer loans to businesses with bad credit.

Not meeting the lender's eligibility criteria

Many lenders will require that your business meets minimum turnover and trading history requirements in order to be eligible for a business loan. Depending on the lender, this means you may need to have been operating for at least 6 months, or in some cases, up to 18 months, and have a minimum monthly turnover of $5,000. If you don't meet these requirements, it's likely your application will be rejected.

  • What should I do before reapplying?

You will either have to wait until your business meets the specific trading requirements, or find a lender that is willing to give a loan to businesses will little-to-no trading history or turnover.

Omitting documents or details from your application

Business lenders require applicants to submit detailed financial information as part of their application. This can include business plans, cash flow projections, bank account statements, tax returns and other legal documentation related to your business.

  • What should I do before reapplying?

Make sure you have submitted all requested business documentation and information, and that your financial details are up-to-date and accurate.

Cash flow issues

All businesses have cash flow problems from time to time, but if your business is regularly struggling to manage its working capital, you may struggle to be approved for a loan. If lenders see that there’s no money for day-to-day operations, it may suggest that your business will be unable to repay the loan. It's also important to note that good cash flow doesn’t automatically qualify you for a loan, but lenders are likely to look more favourably on a business with good cash flow.

  • What should I do before reapplying?

If possible, try to manage or fix your cash flow issues. Alternatively, you could consider other business finance options, such as a business line of credit, or invoice financing, which lets you get access to credit based on your outstanding invoices.

Compare invoice financing products
Data indicated here is updated regularly
Name Product Min. Loan Amount Max. Loan Amount Loan Term Upfront Fee Filter Values
Timelio Invoice Finance
$10,000
$100,000,000
Up to 4 months
$0
Get up to 100% of the value of your invoices without having to wait for customer payments, and with no minimum turnover or operating history required.
Scottish Pacific Invoice Finance
$200,000
$100,000,000
From 1 year
No set amount
Improve your business cash flow by financing your outstanding invoices. No minimum trading history required, but minimum 12 - month term and $200,000 in invoices.
Key Factors Selective Invoice Finance
$0
$3,000,000
From 1 day
$0
Get access to funds in 4 hours. Pay as you use with no minimum, up to 80% advance on invoices, no lock-in contract and transparent fees.
Note: Must have annual sales turnover between $500,000 and $30 million.
BCashflow Positive Invoice Finance
$100,000
$3,000,000
From 1 year
$0
Get funded up to 90% of the invoice in 4 hours. No hidden fees, 1.8% of the invoice for the first 30 days, and 0.06% per day after. Note: Suitable for businesses with monthly turnover between $100,000 and $3,000,000.
Scottish Pacific Selective Invoice Finance
$10,000
$1,000,000
1 to 3 months
$500
Finance your unpaid invoices on demand with terms of 1 - 3 months. 95% of invoice is paid upfront, with no minimum trading history required.
loading

Compare up to 4 providers

Insufficient collateral

Business loan lenders usually require that you use an asset, generally property, as security against the loan. If you apply for a secured business loan and either don't provide an asset or security, or provide one that doesn't meet their criteria, you will likely be rejected for the loan.

  • What should I do before reapplying?

Make sure you have an asset that is suitable to be used as security. If you don't have a suitable asset, there are also a growing number of alternative lenders offering unsecured business loans.

Applying with the wrong lender

Sometimes the reason your loan is rejected is that you are simply with the wrong lender. Institutions have varying lending criteria, so while a traditional bank might not grant you a loan, you might qualify for a loan from an online provider or another alternative lender.

However, if your application was rejected, you can represent a higher risk when you apply elsewhere. While certain providers may be more lenient than others, you might have to settle for higher rates and fees due to the recent rejected application being listed on your file.

  • What should I do before reapplying?

Find a different lender that better suits your needs, and one with eligibility criteria that your business is likely to meet. It may also be worth consulting a broker or financial adviser to help find a finance option that is right for your business.

Read our guide on how to get approved for a business loan


Picture: Shutterstock

Related Posts

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Ask a question
Go to site